It took longer than expected but 10 years ago I started warning people that you cannot hide assets in a trust or try to use a Trust as a way to “hide income”.

There were “experts” that did not agree with me arguing that by setting up complicated “double” and “blind” trusts that no one could access your assets or see what was going on in your different trusts.

Well the days of a “blind” or “secret” trust is over.

In the article below Ettiene explain some of the implications that the latest change regarding the new tax returns on trust will have.

If you are unsure about how to legally use a trust I recommend that you do my “Trust For the Investor and Entrepreneur” DVD Course. You can contact my office (012) 542 4560 during office hours for more information .

Here is the article by Ettiene Retief.

The new tax return for trusts (ITR12TR) came into operation on the 3 October 2014. Designed to provide the South African Revenue Services (SARS) with much more detailed information about all the role-players within a trust and greater disclosure of the activities within the trust, the ITR12TR promises to revolutionise the way in which trusts are administered and used in tax planning.

“Trusts have been given a bad name by a minority of people who have used them solely for the purpose of avoiding or postponing tax.

Now SARS will be in a better position to understand exactly who the founder, trustees and beneficiaries are – and, by connecting all the dots, establish whether the trust is being used improperly,” says Ettiene Retief, chairperson of the National Tax Stakeholders Committees at the South African Institute of Professional Accountants (SAIPA).

Retief explains that, under the old tax return, trusts only had to submit abridged information regarding the trust. This meant that those wanting to use the trust to hide wealth or avoid tax could make it very hard for the taxman to connect the dots.

Another technical factor that has been exploited by illegitimate trusts is that trust deeds are not digitised, meaning that unless one happened to know that a certain individual was involved in a particular trust, it would be very hard indeed to know to request a copy of the trust deed. There is no electronic search facility that could be used to easily find beneficiaries, and required you to obtain a copy of the trust deed. In other words, the information is available, but difficult to access.

“Now all that information will make its way via the new return onto SARS’ databases, and thus make it easier for SARS to link role-players in a trust with individual taxpayers, and the shifting of funds. Coupled with SARS’ greater powers to request information from third parties, I think the days of being able to use trusts as smokescreens are numbered,” Retief observes.

Retief emphasises that trusts are abused by only a small minority, but cautions that those setting up trusts for legitimate purposes need to ensure they are being administered correctly. Too many people think that everything begins and ends with the trust deed being registered, but it’s as important for the trust’s accounts to be kept properly, for provisional and annual tax returns to be filed as required, and for meetings of the trustees to be held as outlined in the trust deed. Trustees have a fiduciary duty and place themselves at risk if the trust is poorly administered.

If the trust is not properly administered, and decisions or day-to-day operations is not done jointly by the trustees, the trust could be attacked as being a sham, even though it was set up for legitimate purposes.

“We must never forget that trusts have a specific purposes, and fulfill a very useful role in society,” Retief concludes. “I am hopeful that this new development will flush out abuse, and that trusts will regain their good name as legitimate financial and legal instruments.”

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Hannes is one of the world’s leading authorities in Wealth Creation. As a speaker and author on the subject he is at the forefront of this personal development industry. He is the founder of the Wealth Creators University and the Wealth Creators Method. The University is a private education organisation based on the culmination of 30 years of experience, research and study into finances, economics, psychology and philosophy.

16 replies to "The Days Of Being Able To Use Trusts As Smokescreens Are Numbered"

Robin Booth

January 22, 2015

Hey Hannes. Agreed.
I have just completed out trusts tax returns and they are asking for EVERYTHING from who has loans to the trust, or the trust has given loans to, etc.
I have done your trust course about 3 times so learned from the start to get it right. So I have no worries about where the new legislation is going.

I have also done Hannes’ Trust Course and thought it was really good. Unfortunately, if we look a where legislation is going, trusts are going to be taxed IN the trust itself. In other words, before you can distribute any money to the beneficiaries. So expect to pay 25% tax and the beneficiaries are also going to be taxed if the income is more than R70 000 per year. Although Hannes’ Trust Course is excellent, it will sadly be outdated soon.

My trust course is not outdated Nick.
You cannot work on maybe’s. If I’ve worked on maybe’s in 1991 when I set up my 1st trust I would never have saved my family millions.
Work on the facts – not on rumors.
And if there are major changes I will update my Trust Course.

Helen – contact the office to send you more information on the “Trust for Entrepreneurs and Investors Home Study DVD course”. You will learn everything you need to know about trusts and financial entities in that one day course. My office tel. number = 012 5424560